Property, Plant and Equipment Accounting Policy

Property and equipment, including assets acquired under finance leases, is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. Target amortizes leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets’ useful lives or a term that includes the original lease term, plus any renewals that are reasonably certain at the date the leasehold improvements are acquired. Depreciation expense for 2018, 2017, and 2016 was $2,460 million, $2,462 million, and $2,305 million, respectively, including depreciation expense included in Cost of Sales. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred. Facility pre-opening costs, including supplies and payroll, are expensed as incurred.

Estimated Useful Lives

Life (Years)

Buildings and improvements

8-39

Fixtures and equipment

2-15

Computer hardware and software

2-7

Target reviews long-lived assets for impairment when events or changes in circumstances—such as a decision to relocate or close a store or distribution center, make significant software changes or discontinue projects—indicate that the asset’s carrying value may not be recoverable. Target recognized impairment losses of $92 million, $91 million, and $43 million during 2018, 2017, and 2016, respectively. The impairment losses primarily resulted from planned or completed store closures, and for 2017, supply chain changes. For asset groups classified as held for sale, the carrying value is compared with the fair value less cost to sell. Target estimates fair value by obtaining market appraisals, valuations from third party brokers, or other valuation techniques. Impairments are recorded in SG&A Expenses on the Consolidated Statements of Operations.

Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.

Target Corp.’s property and equipment, gross increased from 2017 to 2018 and from 2018 to 2019.

Property and equipment, net

Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.

Target Corp.’s property and equipment, net increased from 2017 to 2018 and from 2018 to 2019.

As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company’s fixed asset base is old or new. Newer assets are likely to be more efficient.

Target Corp.’s average age of depreciable property, plant and equipment deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.

Estimated total useful life

Over longer time periods, this ratio is a useful measure of company’s depreciation policy and can be used for comparisons with competitors.

Target Corp.’s estimated total useful life of depreciable property, plant and equipment declined from 2017 to 2018 but then slightly increased from 2018 to 2019.

Estimated time elapsed since purchase

The approximate age in years of a company’s fixed assets. Useful for comparison purposes.

Target Corp.’s estimated time elapsed since purchase of depreciable property, plant and equipment improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level.

Estimated remaining life

Target Corp.’s estimated remaining life of depreciable property, plant and equipment declined from 2017 to 2018 but then slightly increased from 2018 to 2019.

As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company’s fixed asset base is old or new. Newer assets are likely to be more efficient.

Target Corp.’s average age of depreciable property, plant and equipment deteriorated from 2017 to 2018 but then slightly improved from 2018 to 2019.